EUR/USD eases below 1.1750 amid firmer US Treasury yields

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  • EUR/USD snaps two-day uptrend, fades the bound off intraday low amid a sluggish session.
  • US dollar tracks mildly bid Treasury yields to consolidate the heaviest fall in two months.
  • Market seems clueless as vaccine optimism, easing of taper tantrum battle covid woes and geopolitical fears.
  • German GDP, US housing data may entertain traders but risk catalysts are the key to follow ahead of Jackson Hole.

EUR/USD struggles to extend the two-day recovery moves from the yearly bottom, down 0.06% around 1.1735 heading into Tuesday’s European session. The currency major pair rose the most in a week the previous day as risk-on mood underpinned the US dollar losses. However, the recently mixed clues offer a tailwind to the pullback.

Among the lead catalysts, a lack of clarity over the virus conditions and geopolitical concerns relating to Afghanistan and China take the front row. Although Australia’s covid infections eased from the record top, New Zealand Prime Minister Jacinda Ardern warns over the further spreading of the Delta virus. On the same line, the UK’s daily hospitalizations jump to the monthly top whereas figures from the US also push the Biden administration to fasten the jabbing.

Elsewhere, the UK calling of the emergency videoconference of the Group of Seven (G7) leaders to discuss the Taliban-related issues, as well as hints that the US Securities and Exchange Commission (SEC) will increase hardships for Beijing-based companies’ listing, also challenge the risk catalysts. On the same line were chatters surrounding Beijing’s crackdown on technology shares, Sino-American tussles and fears of slowing economic recovery, perceived from early indirection, of China.

While the aforementioned factors weigh on the EUR/USD prices, by way of underpinning the US dollar’s safe-haven demand, the hopes of faster vaccinations and fewer odds favoring the Fed’s tapering help the pair buyers to remain positive. The preliminary readings of the US and Eurozone PMIs for August came in softer than expected, suggesting the need for further easy-money policies. Before that, Dallas Fed President Robert Kaplan signaled to step back on his tapering calls due to the Delta covid variant outbreak.

Against this backdrop, the US 10-year Treasury yields gain one basis point to 1.26% whereas the S&P 500 Futures remain mildly bid at the latest. Further, the US Dollar Index (DXY) consolidates the heaviest daily losses in two months around 93.03, up 0.05% on a day, by the press time.

The second reading of German Q2 GDP, expected to confirm the 1.5% QoQ forecasts, can offer immediate direction to the EUR/USD prices ahead of the US New Home Sales for July, forecast 0.69M versus 0.676M. However, major attention will be given to the qualitative factors for fresh directions before this week’s Jackson Hole Symposium speech.

Technical analysis

Although failures to cross the late July bottom surrounding 1.1750-55 triggered EUR/USD pullback, a convergence of 10-DMA and previous resistance line from August 04, near 1.1730-25, restricts the pair’s immediate declines. It’s worth noting that the pair bulls remain skeptical until the quote stays below a two-month-old descending line, close to 1.1870.

 

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